DTN Oil

WASHINGTON (DTN) -- With global equities on the retreat and the U.S. dollar strengthening, oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange settled the last trading day of April sharply lower. Brent June expired at $67.25 barrel (bbl) following reports a "double-mutant" coronavirus variant first discovered in India has spread into parts of China, fueling concerns that a more transmittable virus could further undermine global demand recovery.

The B.1.617 strain, which contains two mutations of coronavirus, has been ripping through India in the past month, prompting local authorities to reimpose lockdowns in the nation's largest cities and states. Bloomberg estimates the latest surge could shave as much as 20% off India's oil demand this year. On Friday, Biden administration restricted all travel from India to the United States amid "extraordinary high COVID-19 caseload and multiple variants circulating in India."

Even more worrisome, the Chinese Center for Disease Control and Prevention confirmed this week the same variant had been found in "some Chinese cities," adding "implementing containment measures is key to stopping the spread of mutant strains, and also to prevent the occurrence of new mutations."

The potential for another lockdown in the world's largest oil consuming economy joined with additional curbs in international air travel sent oil prices sharply lower in afternoon trading Friday.

Earlier in the session, oil futures came under pressure from downbeat economic data out of the Eurozone, showing gross domestic product for the 19-nation bloc fell 0.6% in the first quarter. This marked the second consecutive quarter of falling GDP in the bloc, meaning the world's largest economy has now fallen into a technical recession.

Germany, the bloc's largest economy, shrank 1.7%, preceded only by Portugal and Latvia, down 3.3% and 2.6%, respectively.

In sharp contrast to Eurozone, U.S. economy is firing on all cylinders, primed by massive government spending and a rapid vaccine rollout. The real gross domestic product grew at a 6.4% annualized rate in the first quarter after expanding 4.2% in the final three months of 2020. The sharp increase was led by personal consumption -- by far the largest component of the U.S. economy, which spiked 10.7% in the first quarter. Business investment, the second largest component of GDP, also had a strong showing in the January- March period, up 9.9% from the previous quarter. Two components of GDP growth -- change in private inventories and net exports -- declined from the final months of 2020, weighing on first-quarter growth.

The argument for a consumer-led boom was further strengthened Friday by data from the Bureau of Economic Analysis showing discretionary spending in the United States jumped 4.2% in March as most Americans received a third round of stimulus checks, and personal incomes soared a record 21.1%.

The personal consumption expenditure price index, the preferred measure of inflation at the Federal Reserve, rose 2.3% in March from a year earlier, the biggest jump in more than two years.

On the session, NYMEX June West Texas Intermediate futures fell $1.43 to $63.58 bbl and ICE June Brent futures expired $1.31 lower at $67.25 bbl. July ICE Brent futures fell $1.29 to settle at $66.76 bbl. NYMEX May ULSD futures dropped 4.03 cents or 2.05% to expire at $1.9211 gallon, with next-month delivery contact settling with a 0.13 cents premium. NYMEX May RBOB futures expired down 3.01 cents at $2.0698 gallon with the June contract shedding 2.75 cents for a $2.0763 gallon settlement.

Liubov Georges can be reached at liubov.georges@dtn.com